Price Momentum Factor - US

Approach

Price momentum (PM) looks at short, medium- and long-term returns. We consider PM at one month, three-months, six-months and twelve months.

We also produce PM skipping the most recent month. The reason that the most recent month is skipped is due to the short-term reversal effect associated with the momentum factor. This is based on the academic finding that previous winners (measured over the past month) do poorly the next month, while the previous losers (measured over the past month) do well the next month.

Finally, we also provide breadth momentum, which is the weighted combination of one-month, three-month, six-month, and twelve-month momentums.

Factors Evaluated

Price momentum considers the price and returns. Analysis is considered primarily on the cadence over short term, medium term, and long term, and then again short term, medium term, and long term skipping one month.

Price momentum:

Momentum 1-month

Momentum 3-months

Momentum 6-months

Momentum 12-months

Price momentum (skip the most recent month):

Momentum 1-month

Momentum 3-months

Momentum 6-months

Momentum 12-months

For Breadth momentum, heavier weights are applied to the more recent months. We provide this composite factor both with and without skipping the most recent one month.

Breadth momentum

Breadth momentum skip the most recent month"

Methodology

We applied the aforementioned price momentum metrics to a universe of the largest 500 US equities by market capitalization and ranked each stock on its price momentum factor. We then divided the universe into 10 quantiles of stocks, with the top quantile (Q_10) representing stocks with the highest value of that factor and the bottom quantile (Q_1) representing the lowest value of that factor.

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